Another chapter of the long, winding saga of the MASN court case between the Orioles and Major League Baseball came to a close on Wednesday afternoon with the judge granting the motion that was at the center of the current brouhaha. This is not the end of the story, though. There will almost certainly be more still to come.
What has come before
When the Expos moved to Washington to become the Nationals, they were owned by MLB. At that time, MLB needed to ensure that Orioles owner Peter Angelos would not be a roadblock to the move. From this was essentially born MASN, an entity that, from its conception, was always intended to be majority-owned by the Orioles. The then-terrible Orioles and nascent Nationals franchise would be paid TV rights fees that were pre-determined for several years; however, starting in 2012, the two parties would have to agree on rights fees. Later, the Nationals were sold to the Lerner family.
Prior to the 2012 season, the time came for the two sides to negotiate. MASN prepared its idea of the new rights fees based on something called the Bortz methodology, which as far as I can tell has been the standard baseball has used to ensure that teams are paying rights fees at a fair value. MLB cares about this because rights fees are taxed for the revenue sharing pool, whereas network profit is not. The son of the Nationals owner literally ripped up the initial MASN proposal and ended the meeting.
A while later, the parties appeared, as in the contract, before MLB's Revenue Sharing Definitions Committee (RSDC), then comprised of a representative from each of the Rays, Pirates, and Mets. MASN stuck with its contended Bortz methodology; the Nationals demanded a rights fee in excess of $100 million. By the contract, the Orioles and Nationals must receive the same rights fee. That provision was to protect the Orioles-owned network from having to dump all its money into the larger market while getting nothing back to the Orioles.
The Orioles believe the intent of the Nationals in making that demand was to bankrupt MASN. Whether or not that's true is not known, but it seems plausible enough. If MASN stops existing, the Nationals will regain control of their own television destiny. As things currently stand, they'll never own more than a 33% stake in MASN, and it'll take another 17 years to reach that stake.
At the RSDC hearing, the Orioles objected to the fact that the Nationals counsel came from a law firm known to represent MLB and different clubs on other matters; they believed this created a conflict. For instance, the same firm representing the Nationals also represented a company at which Mets representative Jeff Wilpon was a partner. The suit stemmed from the Madoff Ponzi scheme - the company's pension plan was wiped out. You will notice the name "Mets" comes up a lot in the bios of the Sterling Equities Associates partners.
The hearing came and went. Privately, the RSDC reached a decision some time in the summer of 2012, but then-commissioner Bud Selig tried to mediate the dispute between the parties to reach a settlement. There were discussions of unknown length and seriousness about selling MASN to a cable company such as Comcast or Time Warner.
This process dragged out for two years. Nobody really knows why exactly. What we do know is that the Nationals became increasingly irate as they were to be paid in the range of $20 million more per year under the RSDC's decision that MASN was actually paying it. MLB advanced the Nationals a $25 million loan privately, expecting they would eventually be paid back either when the RSDC decision took effect or a sale was completed. Both sides were threatening to sue the other. Selig threatened "the strongest possible sanctions" if either party took the case to court.
Ultimately, Selig published the RSDC's decision in the early summer of 2014. The Nationals demanded payment immediately - what was then about $60 million. The Orioles were finally the ones to go to court, seeking an injunction against having to pay until they could have a hearing to determine whether they had a fair hearing. That injunction was granted, although MASN had to post a $25 million bond to ensure if they later lost, they would be able to pay.
Over the months following that, the two sides lobbed bombs back and forth at one another through court filings, eventually having a trial hearing on the matter back in May. There was then six months of silence, until yesterday.
The motion to throw out the RSDC decision was granted by the court. The Nationals/MLB motion to affirm the award was denied. In that sense, it's a victory for the Orioles. Citing "objective facts that are unquestionably inconsistent with impartiality", Justice Lawrence Marks determined that there was "an utter lack of concern for fairness that is so inconsistent with basic principles of justice" that the award must be vacated.
That's good, right? You want to go into court and win. It is good, except...
What did not happen
The Orioles side of the case made many arguments in favor of why they should have the award thrown out. Those included that the RSDC award was obtained fraudulently; that the RSDC acted outside of the scope of its authority; that the RSDC engaged in procedural misconduct biased against the Orioles; and that the $25 million loan necessarily gave MLB a stake in the hearing so they could not be an unbiased arbiter.
Presumably, any one of these arguments, if accepted, would have resulted in the judge granting the ultimate goal of MASN - a new hearing in front of an independent panel. The judge did not do so.
He ruled in their favor over the matter of the law firm's concurrent representation creating "evident partiality." However, Justice Marks also stated in a footnote to his decision that the Nationals might change counsel and there could be a new RSDC hearing without any of the problems that plagued this one. He suggested, but did not order, that the parties might instead agree to "another neutral dispute resolution process."
You'd be inclined to think a new hearing in front of the current RSDC - which has new members now - would end up with more or less the same result, though that's not certain, of course. There is likely some additional leverage in the Orioles' favor from having shown that they're not bluffing and they'll scorch the earth if they think they're getting screwed. They've already taken the league to court once in direct defiance of the commissioner's wishes.
Longtime Orioles counsel Alan Rifkin said in a statement, "Contracts are meant to be honored, and that includes honoring the integrity of the rights fee-setting process. We look forward to a fair and neutral process before an objective decision-maker in the future." Note that there's no mention of an expectation that another baseball-controlled panel will be such an objective decision-maker.
The Nationals attorney, Stephen Neuwirth, essentially declared victory as a result of the judge rejecting four of the five arguments made by MASN. Predictably, Neuwirth downplays the rarity of Justice Marks' verdict. In the opinion, the judge himself notes that an arbitration is seldom vacated by a court. It's hard to do. Once, Neuwirth argued the whole thing was essentially the action of stubborn old Peter Angelos and it was all pointless to argue about it because the Orioles were just so wrong and dumb. He's singing a different tune now that the judge denied his side's motion.
Craig Calcaterra of NBC Sports' Hardball Talk is one of the many law degree-wielding baseball bloggers. He had this to say:
Getting an arbitration overturned ain't easy, but Peter Angelos just did it.— Craig Calcaterra (@craigcalcaterra) November 4, 2015
Calcaterra added that "even a first year lawyer could have identified the fundamental flaw" in the proceeding resulting from the concurrent representation by Proskauer Rose lawyers of the Nationals and both MLB and the specific clubs then on the panel.
What happens if the Orioles refuse to return to the RSDC and the Nationals refuse to have any third party arbitration? Maybe they end right back up in court.
The Nationals could still appeal this decision, as well, challenging that the judge's ruling goes against precedent. Justice Marks wrote that there was not "any precedent involving a substantially similar factual scenario" - which is the kind of thing you might appeal, if you were the Nationals, and argue to a higher court, "Yes, there was!"
It could still end up being nothing more than a symbolic victory for the Orioles side of the case. They've given MLB a black eye but could have to pay up later. The Nationals are surely not going to just give up and accept less money than they also believe they deserve. Yet it's costing them all, too, because the kinds of lawyers that argue these cases surely aren't coming cheap. The Nationals have, thus far, paid to win as many court hearings on this issue as they have won playoff series.
So what if MASN has to pay up later? Having known the general contours of the RSDC decision for three years, if they've been responsible, they've been setting aside money all along in case of a later adverse judgement. There is some evidence that this is the case from a Jonah Keri article in February 2014, before the case had gone to court.
Nothing yet has nudged the two warring franchises into a grudging settlement. It's tough to imagine this being the impetus for such a settlement to finally occur. And whenever the current conflict finally resolves one way or another, the next battle is already looming. All of this drama is concerning rights fees for 2012-16. They've got to wind up and do it all again starting in 2017. Are we having fun yet?
Maybe the only sure thing about all of this is that the All-Star Game isn't going to come back to Baltimore any time soon.